2019 Annual Report BCV at a glance 2019 highlights We delivered very solid results despite the ongoing • We maintained or slightly adjusted our financial negative-interest-rate environment targets: we are still targeting a cost/income ratio of • Volumes expanded across the Bank’s key business 57%–59% and a CET1 ratio of at least 13%; our ROE sectors, and revenues rose 3% to CHF 1.0bn. target based on this minimum target CET1 ratio is • Operating profit increased 4% to CHF 419m, now 13.5%–14.5%. reflecting continued firm cost control. • The Board of Directors is recommending that • Net profit was up 4% to CHF 363m. A CHF 1 increase shareholders approve a 10-for-1 stock split, in order to in the dividend to CHF 36 per share will be proposed enhance the liquidity of BCV’s share. at the next Annual Shareholders’ Meeting. We signed the United Nations Principles for Responsible BCV’s credit ratings were reaffirmed by the two main Investment (UNPRI) rating agencies, underscoring our financial solidity • In becoming a signatory, we have committed • Standard and Poor’s reaffirmed our AA rating, and to six principles that range from incorporating Moody’s reaffirmed our Aa2 rating, both with a environmental, social, and governance (ESG) criteria stable outlook. BCV is one of the best-rated banks in into our investment analyses, to reporting on our the world without an explicit government guarantee. responsible investment activities annually and promoting the principles within the financial sector. We paid out CHF 301m to our shareholders The UNPRI are the world’s leading framework for • In accordance with our dividend policy, which was responsible investment and provide an important extended in 2018, BCV paid an ordinary dividend platform for stakeholder engagement. of CHF 35 per share to shareholders in May 2019, corresponding to a CHF 2 increase relative to the previous year. This CHF 301m payout, together with the appreciation in our share price, equates to a total return of 11.3% in 2019. We developed a new strategic plan, vista • Building on the positive results of our previous strategic plan, stratégie2018, we defined several areas where we will focus our efforts to meet future challenges. In particular, we plan to further improve our service quality and continue enhancing our distribution channels – branches, digital services, and call centers – in order to give customers an integrated multichannel experience. We also intend to capture more of the cross-selling potential inherent in our universal bank business model, and to increase our attractiveness as an employer. Key figures – 5-year overview Balance sheet (in CHF millions) 2015 2016 2017 2018 2019 Total assets 43 418 44 085 45 415 47 863 48 352 Advances to customers 29 457 29 849 30 233 31 756 32 768 Customer deposits 28 877 29 245 30 512 31 375 33 048 Shareholders' equity 3 397 3 420 3 457 3 522 3 586 Assets under management (in CHF millions) Assets under management 87 972 85 382 86 490 87 620 97 840 cash and cash equivalents 24 900 26 009 26 977 28 062 29 837 investment funds 21 164 19 812 21 807 21 817 25 217 shares 22 891 21 588 19 871 18 485 20 934 bonds 13 156 11 029 9 764 9 413 9 746 other 5 861 6 945 8 071 9 843 12 106 Headcount Full-time equivalents 1 947 1 943 1 922 1 896 1 921 Income statement (in CHF millions) Total income 1 026 967 967 977 1 002 Operating expenses 514 509 508 500 505 Depreciation and amortization of fixed assets and impairment on equity investments 76 72 70 69 71 Other provisions and losses 37 3 1 5 7 Operating profit 399 383 387 403 419 Net profit 336 310 320 350 363 Liquidity and capital ratios1 Liquidity Coverage Ratio (LCR) 111% 113% 121% 113% 129% Leverage Ratio 6.7% 6.6% 6.5% 6.2% 6.3% Tier 1 capital ratio2 18.3% 17.5% 17.1% 17.1% 17.1% Total capital ratio2 18.4% 17.6% 17.3% 17.2% 17.3% Income ratios Operating profit/average shareholders' equity 12.0% 11.4% 11.4% 11.6% 11.9% Cost/income ratio3 57.2% 59.4% 58.3% 57.6% 57.7% Operating profit per employee (in CHF thousands) 205.5 197.1 201.6 211.8 219.3 ROE 10.1% 9.1% 9.4% 10.1% 10.4% Credit ratings Standard & Poor's Long term AA / stable AA / stable AA / stable AA / stable AA / stable Short term A-1+ A-1+ A-1+ A-1+ A-1+ Moody's Long term Aa2 / stable Aa2 / stable Aa2 / stable Aa2 / stable Aa2 / stable Short term Prime-1 Prime-1 Prime-1 Prime-1 Prime-1 1) More detailed information on Group and parent company liquidity and capital ratios can be found in the Basel III Pillar 3 report, which is available at www.bcv.ch and on the BCV Investor Relations iPad app. 2) To facilitate like-for-like comparison, the ratios for 2015 and 2016 have been recalculated without subtracting the countercyclical buffer from regulatory capital, in accordance with FINMA Circular 2016/1 “Disclosure – banks” 3) Excluding goodwill amortization and write-downs PB 2019 Annual Report 1 Here are some examples of how we’ve executed on our commitment to corporate social responsibility 1 of 2 people in Vaud We provide 1 of 3 bank with BCV mortgage loans in Vaud Over 60% of our customers use our digital banking services 32 37 High-school Trainees graduates Personal banking advisors 18 Staff University interns 1 of 2 Vaud small businesses 7 of 10 Vaud pension funds bank with BCV count on BCV 92 new businesses financed -3% We back 650 events Paper use and associations We work with over 600 local vendors For more details on CSR at BCV please see our 2019 Sustainability Report. 2 2019 Annual Report 3 Our reports 2019 Annual Report Pillar 3 Report This report contains BCV’s consolidated and parent- Our Pillar 3 Report provides investors, analysts, rating company financial statements. It also provides information agencies, and regulators with in-depth information on risk on our activities in 2019, including a review of each of our management at BCV, including detailed information about business sectors and an overview of the overall economic the Bank’s capital adequacy, risk-assessment methods, and environment. You will find other key information as risk levels in 2019. The report was drawn up in accordance well, especially in the chapters on risk management and with the Pillar 3 disclosure requirements set forth in the corporate governance. Basel III Accord and in Circular 2016/1 “Disclosure – banks” issued by the Swiss Financial Market Supervisory Authority (FINMA). The Pillar 3 Report is issued on a half-yearly basis 2019 Sustainability Report with reporting dates at 30 June and 31 December. Our Sustainability Report provides a detailed look at the progress we made and the steps we took as a responsible corporate citizen in 2019. It offers a broad, transparent view of what we are doing to fulfill our commitment to promoting economically, socially, and environmentally sustainable development. The report is drawn up in line with the Global Reporting Initiative standards (www. globalreporting.org), which are the worldwide reference for reporting on sustainable development issues. Most bn recommended bank in Vaud 2018 Taxes and dividend payments to Vaud Standard & Poor’s canton and municipalities – last 10 years 2019 rating Source: LINK Institut, 2019, recommendation to a friend Survey of 1,646 Vaud residents, representative of the population 2 2019 Annual Report 3 Vevey was once again host to the Fête des Vignerons is part of UNESCO’s intangible cultural heritage. For three winegrowers’ festival in 2019. The town pulled out all the weeks, locals and visitors alike mingled with a plethora of stops for the festival’s 12th edition, with 20 shows, 5,500 joyfully made-up characters, sparkling costumes, animals, and performers, 355,000 tickets sold, and close to a million visitors. enormous insects as they wandered around town or took a From 18 July to 11 August, the streets of Vevey were filled seat at one of the 50 or so food stands and restaurants. with shows, processions, and a wide range of musical and cultural performances. The market square was transformed As in previous editions, BCV was an official sponsor of into a vast arena with space for 20,000 spectators – all eager the Fête des Vignerons in 2019 as well. We are committed to see the enchanting show and especially the grand finale in to supporting cultural activities and major events in our which winegrowers are crowned. canton, so it made sense for us to be one of the main partner companies for this once-in-a-generation celebration of Vaud Outside the main arena, the whole town became an open wines and winegrowers. A large number of BCV employees stage with events from dawn to dusk. The Fête des Vignerons were also involved either as volunteers or walk-on performers. has been held approximately every 20 years since 1797. It’s Dressed as bannerets, leaf-pickers, and buds, they spared no a symbolic event in Vaud Canton and further afield – and effort in ensuring that the festival was a success. 4 2019 Annual Report 5 Contents Letter from the Chairman and the CEO 6 Financial Statements 104 Report on the Consolidated Financial Statements 106 Who We Are 10 Consolidated Financial Statements 111 Overview of BCV 10 Parent Company Financial Statements 164 The BCV Share 14 BCV - our Missions 18 Organization Chart 194 Year in Review 30 Retail Network 196 Economic Environment 30 BCV in 2019 42 Regional Managers 197 Business Sector Reports 48 Branch Offices 198 Risk Management 58 General Approach 58 Credit Risk 60 Market Risk 62 Operational Risk 65 Corporate Governance 70 Group Structure and Shareholders 71 Capital Structure 72 Board of Directors 74 Executive Board 85 Compensation, Shareholdings, and Loans 92 Shareholders’ Rights 97 Takeovers and defense measures 99 Auditors 99 Disclosure Policy 100 Contacts 101 4 2019 Annual Report 5 Letter from the Chairman and the CEO A very good year for BCV Serving the people of Vaud for 175 years We had a successful year in 2019, delivering results on In 2020, we are celebrating your Bank’s 175th anniversary.